What Drone Insurance Actually Covers (And What It Never Covers)

Quick TL;DR

• Drone insurance is a bundle of separate products, each doing a different job: liability covers third party injury or property damage, hull covers your aircraft physical damage, payload covers cameras and sensors if scheduled, E&O covers professional mistakes, and cyber covers data breaches.

• No single policy magically covers everything. The usual reason claims fail is a mismatch between the loss and the exact wording in the policy. Read the exclusions first.

• Fixes: schedule expensive payloads, get agreed-value for high-end gear, buy cyber if you hold client data, and match COI wording exactly when a client or venue asks.

Executive summary

People assume “drone insurance” is one thing. It is not. It is a stack of targeted policies and endorsements. That confusion is why so many claims are denied or underpaid. 

This article cuts the fluff and gives you the practical, actionable truth: what each common cover pays for, the exact situations that routinely get denied, how to spot dangerous contract language, and a short checklist to use before you accept paid work. 

Read it, fix your policies, and stop leaving money on the table.

The coverage pieces you must treat separately

1) Third party liability (general liability for drones)

What it covers

• Pays damages and legal defense if your drone injures a person or damages someone else’s property while you operate.

• Typical limits sold: $500,000, $1,000,000, $2,000,000 per occurrence.

What it does not cover

• Damage to your own drone or payload.

• Professional mistakes unless you bought E&O.

• Fines and penalties from regulators.

Why it matters

• This is the minimum for commercial work. If a drone falls from 200 feet and damages a car or injures a guest at a wedding, liability is what saves you from personal bankruptcy.

2) Hull insurance (airframe physical damage)

What it covers

• Pays to repair or replace your drone after crash, hard landing, fire, transit damage if specifically covered. Subject to deductibles.

• May include coverage in-flight, in transit, and storage if policy lists those.

What it does not cover

• Unless payloads are scheduled, cameras and LiDAR are often excluded.

• Wear and tear, manufacturer defects, or intentional damage are usually excluded.

• Theft from an unattended vehicle often excluded unless inland marine or theft-in-transit is added.

Why it matters

• Hull gets your business flying again. If you run inspection or real estate work, downtime costs matter as much as parts cost.

Read: Short-Term vs Annual Policies: When Pay-As-You-Fly Makes Sense

3) Payload and camera coverage

What it covers

• Specifically schedules cameras, gimbals, LiDAR, SSDs and pays agreed value or ACV on loss if they are listed.

• Can be written as agreed-value to avoid depreciation fights.

What it does not cover

• Unscheduled, detachable cameras are the number one reason for reduced payouts.

• Data on SSDs is separate; payload cover usually replaces hardware, not the data or notification costs.

Why it matters

• If your camera is worth more than your drone, this is the policy line that matters for full recovery.

4) Professional liability / Errors and Omissions (E&O)

What it covers

• Claims for negligent professional services: bad mapping deliverable, incorrect analysis, missed defect that caused financial loss.

• Often used by surveyors, mapping firms, and consultants who give actionable conclusions.

What it does not cover

• Bodily injury or property damage from a crash. That stays in liability.

• Cyber breach costs unless cyber is purchased.

Why it matters

• A client who loses money because of incorrect measurement or a bad survey can sue for professional negligence. E&O pays defense and settlements.

5) Cyber and data liability

What it covers

• Forensic costs, notification, legal defense, regulatory fines where insurable, PR, and possibly business interruption following a data breach.

• Covers liabilities from leaked images, exposed PII, or stolen client data.

What it does not cover

• Replacement of the physical SSD hardware is hull. Cyber covers consequences of data compromise, not the physical media alone.

Why it matters

• High resolution imagery can include PII or sensitive infrastructure data. Losing that can cost far more than the camera itself.

6) Non-owned and rented equipment coverage

What it covers

• Protects you when operating rented or borrowed drones and payloads. Often sold as a rider or separate floater.

What it does not cover

• Owner negligence if the owner requires special contractual wording and you did not comply.

Why it matters

• If you rent a high-end camera for a shoot, this saves you from a major hit if that camera is lost in your care.

The things drone insurance almost never covers

Here is the short, brutal list you must memorize:

• Regulatory fines or criminal penalties for breaking FAA rules, unless the policy explicitly allows coverage and the law allows insuring fines.

• Intentional acts, reckless conduct, or operations that violate the policy terms.

• Wear and tear, maintenance failures, or manufacturing defects.

• Data breach costs unless you bought cyber coverage.

• Unscheduled payloads and many theft-in-transit scenarios unless scheduled or inland marine is added.

• Business interruption from lost clients unless business interruption insurance is purchased and it applies.

When you hear “we cover everything” from an agent, slam the brakes and ask for policy text.

Real claim examples: what gets paid and what gets denied

Example A - Real estate shoot, drone clips gutter and breaks a window

• What the insurer did: Liability covered property damage and legal defense. Hull covered the drone repair. Payout successful after deductible.

• Why it paid: Operation was within policy terms, pilot was named or permissive, and the payload was scheduled.

Example B - Camera worth $12,000 destroyed but not scheduled

• What the insurer did: Hull paid only for the airframe. Camera excluded or paid ACV with heavy depreciation. Owner left with a large shortfall.

• Lesson: schedule payloads or buy agreed-value if your camera matters.

Example C - Rented drone stolen from unlocked car

• What the insurer did: Claim denied because theft from unattended vehicle excluded by the policy.

• Fix: inland marine or theft-in-transit coverage would have helped.

Example D - Client sues because mapping deliverable caused construction error

• What the insurer did: If E&O purchased, defense covered and possible settlement paid. Without E&O, defense costs came from the operator’s pocket.

• Lesson: for mapping and surveying, E&O is not optional.

Example E - SSD with client imagery is lost and sensitive data leaks

• What the insurer did: Hull paid for SSD hardware replacement. Cyber policy paid forensic fees, notification costs, and legal settlement. No cyber policy would leave those costs to you.

• Lesson: cyber covers the expensive aftermath.

Common exclusions and the exact phrases you must watch for

These are the dangerous words that bite you in a claim fight. When you read your policy, highlight them.

• “This policy does not apply to operations in violation of law or regulation.”

  • Why it matters: FAA violation cited? Insurer may deny. Ask for clarification on administrative lapses versus willful wrongdoing.

• “Payloads are excluded unless scheduled on the schedule page.”

  • Why it matters: if your camera is detachable and not listed, it may be excluded.

• “Theft from unattended vehicle is excluded.”

  • Why it matters: common real-world denial.

• “Coverage applies only to named pilots listed on the declarations page.”

  • Why it matters: subcontractor flew the job? Denial risk.

• “Data breach, cyber extortion and notification costs are excluded.”

  • Why it matters: if you handle client data, check cyber coverage.

If you find these phrases, do not accept them passively. Negotiate endorsements or buy separate policies.

How to confirm coverage before you accept paid work - practical checklist

Copy this and use it for every job:

1. Ask client for exact COI wording and minimum limits in writing.

2. Send your broker the COI request and ask for a sample certificate before signing.

3. Confirm payload scheduling if your camera or sensor value > $2,000. Provide serials and invoices.

4. Confirm named pilot language or permissive pilot endorsement. Add subcontractors to the policy or get them to show COIs.

5. If job involves data collection, confirm cyber limits and first-party coverages.

6. If flying over people or at night, confirm that endorsements are in place. Get waivers if required by FAA.

7. Ask for written confirmation from the broker that the policy will respond for the specific job; save the email.

If your broker refuses to confirm in writing, find a broker who will.

Sample policy language to request (copy-paste to your broker)

Use this when you need clarity or an endorsement.

"Payload coverage: Insurer agrees to cover scheduled detachable payloads listed on the schedule page at the agreed value shown, subject to deductible. Coverage includes theft in transit while under the direct control of insured or while secured in a locked vehicle during overnight stops."

"Permissive pilots: Coverage extends to any pilot who meets the insured's minimum training and flight hour criteria as listed in the operations manual, provided pilot log is supplied within 5 business days."

"Data breach: First party cyber coverage to include forensic investigation, notification costs, legal defense and regulatory fines where insurable, subject to policy limit."

Get the insurer to put language like this in the binder or as an endorsement.

What to do immediately after a loss that increases your chance of payment

1. Preserve originals: SD cards, telemetry, photos of scene, witness contacts. Do not edit originals.

2. Export raw telemetry and hash files if possible. Keep backups.

3. Notify your broker and insurer within the policy notice period. Follow up with email.

4. Do not admit fault. Don’t post on social media.

5. Gather job paperwork: contracts, COIs, permits, client releases.

6. If denied, request the claim file and the clause being used to deny. Build an appeal with concrete evidence.

Documentation is the currency of claims. If you cannot produce telemetry, your case is weaker.

Short FAQ - quick answers

Q: Will my homeowner policy cover my drone?

A: Rarely for commercial use. Homeowner policies often exclude aircraft operations and business activities. If you fly commercially, buy a dedicated drone policy.

Q: Is hourly on-demand insurance enough?

A: Only if it covers the specific needs for the job: liability, hull, payload scheduling, and COI wording. Otherwise it is a risk.

Q: What is agreed-value and why should I care?

A: Agreed-value is a pre-agreed payout for a total loss. It removes depreciation disputes. For high-value payloads it is almost always worth the extra premium.

Q: Does liability cover fines and penalties?

A: Generally no. Regulatory fines and criminal sanctions are usually excluded.

Final advice

If you run a drone business and you still rely on a single polyglot policy told to you in a phone call, you are fragile. 

Treat insurance as a stack of tools, not a single magic bullet. Schedule your high-value payloads, buy cyber if you hold client data, insist on permissive pilot wording if you rotate pilots, and get sample COIs before you accept work. 

The small premium you pay for certainty is always far cheaper than a denied claim.

Read: Insurance Checklist for Starting a Drone Service Company (Legal + Insurance Steps)

Author

Svetlana - I am a Drone Insurance Writer and Researcher. I write about drone risk management and insurance for US pilots. Not a licensed broker. For policy advices contact a licensed insurance professional.